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World wheat trade down, U.S. exports cut

World wheat trade in 2010/11 is projected down 1.0 million tons to 124.3 million because of weak Russian demand for imported wheat, high wheat prices, and grain export restrictions by both Russia (a complete embargo) and Ukraine (export quotas). These developments are projected to reduce grain imports for a number of countries.

The biggest wheat import reduction is projected for Russia, down 1.5 million tons to 0.5 million. In addition to lower projected feed use discussed earlier, the wheat balance in Russia might not be as tight as the official data suggest. Analysis of the availability of monthly wheat stocks indicates that the change in stocks in a number of regions is too small relative to recorded domestic consumption. (For example, in Altai Krai, the difference between February and January beginning wheat stocks is smaller than reported industrial use.) It is possible that some wheat supplies in Russia have never been fully accounted for (partly to qualify for Government subsidies, and partly to avoid taxation), and these are slowly coming on to the market.

Ukraine was expected to be the main provider of wheat into Russia, but there is little indication of any wheat coming from Ukraine to Russia. It appears that Russian demand for wheat is too weak, given apparently adequate wheat supplies and comparatively low domestic prices. A cutback of wheat imports by Russia is the main reason Ukrainian wheat exports are reduced by 1.5 million tons to 4.0 million. But in addition, there is a continuing disruptive uncertainty concerning the status of wheat exports quotas in Ukraine. The quotas are currently scheduled to expire on March 31, but there are signs that the quota regime could be extended to either the end of May or June of this year. Wheat exports to Russia are not affected by the export quota, as the two countries have a special inter-governmental agreement. As of the end of January, Ukraine has exported 2.6 million tons of wheat.

For Australia, wheat exports for 2011 July-June trade year are up 1.0 million tons to 15.0 million, while for its October-September marketing year wheat exports are left unchanged at 13.5 million tons. With higher output of milling-quality and easily exportable wheat in Western Australia, the country is expected to provide formidable competition to U.S. wheat in the coming months, particularly through the end of June (the end of the trade year). At the same time, it is expected that after June, Australia’s exports will come under pressure from the new U.S. crop, which will be available in late May and June. This should keep Australian marketing year exports unaltered.

Wheat exports from Paraguay are up 0.4 million tons to 1.3 million, based on the strong pace of shipments to Uruguay in recent months. Given that Paraguay is land-locked, with only river barges as a means to ship wheat, its exports out of the Rio de la Plata officially go through Uruguay and Argentina. Therefore, Paraguay’s trans-shipped river wheat exports appear as both imports and exports by the two countries. Because of these trans-shipments, wheat imports by Uruguay and Argentina are both up 0.3 and 0.1 million tons, respectively, while Uruguay’s exports are up 0.4 million tons.

EU-27 wheat exports are down 0.5 million tons to 21.0 million, based on limited EU wheat supplies and a strong Euro, both of which support high EU domestic prices. Exports by Pakistan and Sri Lanka are up 0.2 and 0.1 million tons to 1.3 and 0.3 million, respectively.

The largest import change, other than for Russia, is a 0.5-million-ton increase for Brazil. Small import changes are also made for a number of countries, based mainly on the pace of shipments. However, these changes are completely offsetting.

Faced with increased competition from Australia and larger supplies of high-quality wheat, U.S. exports are reduced 0.7 million tons to 34.7 million (down 25 million bushels to 1,275 million bushels for the June-May 2010/11 local marketing year). For the July-June trade year, U.S. year’s exports of 24.2 million tons. Despite very high outstanding sales, as we enter the last quarter of the marketing year, it becomes increasingly difficult to sustain the pace of shipments necessary to meet last month’s U.S. export projection, particularly with larger supplies in Australia.

From July 2010 through January 2011, the U.S. Census Bureau reported that exports of wheat reached 18.73 million tons, up 40 percent compared with the previous year. Grain Inspections for February 2011 indicate that wheat exports were up about 36 percent compared with a year ago. Outstanding export sales as of March 3, 2011 are at 8.5 million tons, more than double last year at this time.